Are You Worried About Having Enough Money to Start Investing?

One of the biggest excuses I hear from investors is that they don’t have enough money to get started in investing or they can’t do any deals right now because they’re low on money.

In fact, I was just at a networking event talking with an investor who told me he was taking some time off because he was short on funds.

Now, every time I hear something like this I want to laugh.

Isn’t the point of being a real estate investor to generate these funds by buying and selling houses? How are you supposed to ever do this if you’re taking time off until you have the money? Obviously this makes no sense.

But here’s what I told the guy I was talking to and what I tell all new investors: When you start out in this business almost all of us are broke. But we have to remember that in addition to being real estate investors we’re entrepreneurs. And entrepreneurs move ahead no matter what and solve problems as they come along.

What I mean is, go find the deal and then worry about how to finance it and how to get the money. Don’t work your 9-5 job until you have $20,000 saved or whatever amount you think you need.

The money will come…

Instead, market for deals and when one comes along the money will come out of the woodwork, I can promise you this. If it’s a quality deal and the numbers work then you should have plenty of investors willing to partner with you 50-50 on it.

This is how I started out in the business by splitting the profits with a much more successful investor in my area.

The funny thing is, it still amazes me when investors don’t understand that 50% of something is a lot better than 0% of nothing. Over the years, as I’ve become more successful, I’ve split many deals with investors. And it still blows my mind when I tell an investor that we split it 50-50 and he refuses and walks away.

What you should have…

However, do make sure that when you find a deal and someone else provides the money that you have a written agreement stating how the profits will be split. Also, be very careful who you work with. If you attend your REIA meetings on a monthly basis, you’ll become very familiar with the “players” in your area. But if somebody approaches you, who you don’t know from Adam, then do you homework on them.

It all boils down to this. Stop making excuses and get out there. Find the deals and worry about getting the money later. If you really want to be a successful investor and entrepreneur then you’re going to have to learn how to build up your risk muscle.

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About Author

Jason R. Hanson is the founder of National Real Estate Investor Month and the author of “How to Build a Real Estate Empire”. Jason specializes in purchasing properties “subject-to” and has purchased millions of dollars worth of property using none of his own cash or credit.

3 Comments

Hey Jason,
great post. As a student and aspiring entrepreneur / real estate investor it makes me hopeful that I can pursue what I want when I want. Its amazing how much negativity there is in the media and the blogosphere with regards to getting out of college and into the industry you want to be in…

On the note of entering the industry, is it realistic for some one like me (a college student with no practical experience putting together deals) to hold my ground and request a 50% partnership if I find the deal? Say I can only contribute 25% of the funds – what would be a realistic share of the equity then? Whatabout if I can’t contribute any funding but simply find and put the deal together? These are all questions I’m sure newby investors have… also,would you recommend different kinds of contracts for the different scenarios I mentioned above? Perhaps nda’s when approaching investors and requesting capital to put deals together?

This is a great post and helps a lot of us just getting started. I almost went into a joint venture just last week. The guy had a property under contract (actually he had 5, but I was going to partner in one of them) and it was a fix N flip deal. He had a presentation that intended on him getting the hard money loan and the investor/partner putting up the 30% down payment. His offer was to split the profit 50/50. He had a team of people all lined up ready to go. I was very attractive to me because I’m still working full-time and it would be helpful to partner with someone who would also be on site taking care of things.

I did end up backing out of deal because his financing fell through and even though I could fund 100% of the deal and get 50% profit for less work, I decided not to move on it for 100% of the risk. I did my due diligence and had a lawyer look at the contract who “strongly” advised me not to move forward, mostly because my name wasn’t on the title. He couldn’t assign it to me because it was an REO and neither he nor my lender like the idea of a double close. In the end the contract between us was vague and confusing, so if I partner with someone else in the future I’ll know what to do!